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also why don’t we add the value of the NPV of the delayed project to the option value of 13.xx something?????
It was quite a simple concept to grab – your extremely simple language made it so much clearer in my head.
Thank you so much tutor!The answer of the working capital cycle is indeed 73 days and the purchases wasn’t a distraction it had to be used for calculating the payable days and also for the 6 marker analysis question that followed it.
You were supposed to use “Cost of Goods sold” or Cost of Sales(For WIP and Finished) in other words for the Working Capital Question.
Even I couldn’t understand what they were specifically asking us to do like production is already at it’s full capacity of course we are going to buy everything from Lithium Co but according to me this question was probably based on Make or buy decisions with limiting factor. I did not want to leave the excel sheet empty so I did the procedure relating to this topic just in case that was what you were actually meant to do.
And i am pretty sure the margin of safety for the concert questions was 33% because the private boxes had a fixed cost of 75*4=300 (waiters fees was charged regardless of whether all 4 boxes are in use or not) and another fixed cost of 1200 mentioned in the question. So in total 1500 (Fixed Cost) and each private box generated a contribution of (600-100=500) so the breakeven was 3 private boxes and the margin of safety if all of them are in use is 2000-1500/1500*100 which is 33.333333% rounded of to 33 percent.